Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83562
Authors: 
Benczúr, Péter
Kónya, István
Year of Publication: 
2007
Series/Report no.: 
MNB Working Papers 2007/2
Abstract: 
This paper develops a flexible price, two-sector nominal growth model, in order to study the role of the exchange rate regime in capital accumulation (convergence). We adopt a standard model of a small open economy with traded and nontraded goods, and enrich its structure with costly investment and a preference for real money holdings. We find that (i) the choice of exchange rate regime influences the transition dynamics of a small open economy, (ii) a one-sector model does not adequately capture the channels through which the nominal side interacts with real variables, and (iii) as a consequence, sectoral asymmetries are important for understanding the effects of the exchange rate regime on capital accumulation.
Subjects: 
two-sector growth model
small open economy
capital accumulation
household portfolios
real effects of nominal shocks
JEL: 
F32
F41
F43
Document Type: 
Working Paper

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